David Perdue: ‘I spent most of my career’ outsourcing

In a 2005 deposition, Perdue said companies hired him to outsource manufacturing jobs. | AP Photo

“Cherry-picking sentences from a 186-page legal deposition leaves them grossly out of context,” Dickey asserted. “David has spent 40 years dealing with bad government policies that put our manufacturers at a disadvantage internationally. He wants to use that experience in the Senate to revitalize domestic manufacturing by removing the barriers to competitiveness.”

After a highly successful run at Reebok, Perdue was hired in June 2002 to turn around Pillowtex, which was foundering under pressure from lower-cost competitors with overseas manufacturing plants.

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The venerable firm, which traced its origins to the late 1880s, was one of the last American textile companies with factories in the United States. But with the U.S. textile industry facing a flood of cheap imports, the company was in serious trouble. Pillowtex was already in bankruptcy when Perdue was given his four-year contract as CEO, and the company was in danger of going under if it didn’t change its business model quickly.

Perdue was recruited in part by officials from Oaktree Capital Management, a Los Angeles-based investment firm that owned a big chunk of Pillowtex’s debt and was a major stockholder.

Describing his mandate during the deposition, Perdue said, “I wanted to know … in the plan of reorganization, what would be required to support the marketing efforts and what capital would be required to convert certain production from domestic factories to Third World — or predominantly Asia sourcing.”

The campaign manager added that the plan would have the potential for retaining some American jobs, although there was no mention of that in Perdue’s testimony.

“The post-bankruptcy plan David inherited was intended to develop international sources for their less expensive product lines, making them more competitive and stopping the company from hemorrhaging losses,” Dickey said. “However, the company also wanted to aggressively market its more profitable higher-priced products, which would have offset domestic job loss. This was a plan designed to save the company and American jobs.”

But Perdue’s tenure at Pillowtex went badly from the start, the deposition shows.

Perdue said he was not aware of an estimated $40 million in unfunded pension liabilities when he was hired.

Pillowtex’s board of directors also failed to follow through on some of its financial commitments to Perdue personally, he said during his deposition. Perdue received a $1 million-plus signing bonus when he joined Pillowtex, and he was promised options on 800,000 shares of company stock. He was also promised a “back-end” payment of $2 million. Perdue never got the options or the $2 million payment, although he received $700,000 to cover any potential tax liability from the options.

In addition, Perdue was paid $100,000 to relocate to North Carolina, despite the fact that he never did so.

Perdue said he went to Oaktree for more money to cover the cost of Pillowtex’s reorganization after he uncovered the pension problems. He estimated that he needed at least $22 million to initiate the outsourcing plan. Oaktree refused to kick in any additional funds.

Perdue said he then worked to come up with revised reorganization plans, including exploring potential mergers or a sale to another company. When “liquidation” was mentioned as a potential option, Perdue told other company officials that he was not interested in being involved in that process.

Perdue, though, also testified that he heard whispers from inside Pillowtex that he was just involved in a “money grab,” an accusation that he resented bitterly. Perdue gave up a potential bonus worth as much $5 million when he left Reebok for Pillowtex, according to the deposition.

By January 2003, Perdue had been approached about the Dollar General position, just six months into his tenure at the North Carolina company.

Despite his talks with Dollar General and unhappiness with his contract, Perdue made one last effort to rework his compensation package at Pillowtex. Although its finances were precarious, Perdue and Pillowtex officials had discussions on a deal for him worth as much as $9 million, the deposition shows.

However, those contact talks went nowhere, and Perdue jumped to Dollar General in March 2003, less than nine months after being hired for the Pillowtex job.

By July 2003, Pillowtex shut down. More than 7,600 workers lost their jobs.

Perdue has compared his tenure at Pillowtex to “running into a burning building,” blaming the company’s collapse on the pension problems and other factors beyond his control.